National prices increase for tenth consecutive month in October | Latest Proptrack Report

Key takeaways

Australian home prices continued their ascent in October jumping 0.36% month-on-month to reach a fresh price peak. Prices nationally are higher than they were a year ago (+4.54% year-on-year).

Sydney prices have now fully reversed 2022’s falls after rising for eleven straight months and are 0.32% above their previous peak recorded in February 2022 with prices increasing 0.37% in October. Prices in Sydney are now 7.71% higher than their trough in November 2022 and are now up 7.62% so far this year.

All capitals, except Darwin, saw prices rise in October with the smaller capital city markets continuing their outperformance as Brisbane (+0.52%) and Perth (+0.52%) led gains through the month.

In July Brisbane clawed back last year’s price falls entirely, prices rose another 0.52% in October to reach a new peak. Prices are now 7.36% above their levels a year ago and up 7.73% year to date.

As has been the case for much of the year, regional areas saw slower growth than capital cities; prices in the capitals are up 5.95% year to date, compared to 2.43% for regional areas. However, the pace of growth in regional markets has increased after lagging much of this year. In October, regional prices rose 0.32% to set a record high, while capital city prices rose 0.37% to a fresh record also.

Regional Queensland (+0.61%) and regional WA (+0.45%) led regional gains in October, with prices in both markets reaching a new peak.

The latest Proptrack Home Price Index showed that the home price upturn is firmly entrenched and prices hit fresh record highs in many markets in October.

National home prices reclaimed 2022’s price falls in their entirety last month, with the upswing continuing in October as national home prices climbed 0.36% month-on-month to set another record, bringing them up 4.93% so far this year.

Proptrack Senior Economist Eleanor Creagh explains:

"With the spring selling season in full swing market activity ramped up in October.

Buyer and seller confidence is buoyant, and choice has improved significantly in the major capitals.

Although the flow of new listings hitting the market has risen, the demand for housing has remained strong and home prices continued to move higher with the upturn firmly entrenched.

October marked the tenth consecutive month of national home price growth.

After falling 4.04% from March 2022 to December 2022 national prices are now up 4.93% from the low point recorded in December having reclaimed a fresh record high, and are now 4.54% above their levels a year ago."

Creagh further explained:

"National home prices increased 0.36% in October, marking their tenth consecutive increase, the longest period of consecutive monthly growth since the pandemic boom, which saw 23 consecutive months of growth from May 2020 to March 2022.

This continued lift means prices nationally have grown 4.93% since their low point in December 2022, reversing the fast falls seen in 2022 in entirety last month, to now sit 0.69% above their previous peak recorded in March 2022 and 4.54% above their year ago levels.

While interest rates were the primary driver of home price falls seen for much of 2022, there are other factors like labour market conditions, the rate of immigration, home building, the supply of properties for sale, state of rental markets and interstate and regional migration that all also affect home price growth, as well as how it is distributed across the country."

House and unit prices are higher than a year ago

According to PropTrack, prices for detached houses nationally grew 0.3% in the month; while unit prices grew 0.31%.

House prices have grown more quickly over the past year and are now 4.55% higher than a year ago, while unit prices are up 4.48% on their year-ago levels.

Key findings from Proptrack's October 2023 report:

• Australian home prices continued their ascent in October jumping 0.36% month-on-month to reach a fresh price peak. Prices nationally are higher than they were a year ago (+4.54% year-on-year).
• Sydney prices have now fully reversed 2022’s falls after rising for eleven straight months and are 0.32% above their previous peak recorded in February 2022 with prices increasing 0.37% in October. Prices in Sydney are now 7.71% higher than their trough in November 2022 and are now up 7.62% so far this year.
• All capitals, except Darwin, saw prices rise in October with the smaller capital city markets continuing their outperformance as Brisbane (+0.52%) and Perth (+0.52%) led gains through the month.
• In July Brisbane clawed back last year’s price falls entirely, prices rose another 0.52% in October to reach a new peak. Prices are now 7.36% above their levels a year ago and up 7.73% year to date.
• As has been the case for much of the year, regional areas saw slower growth than capital cities; prices in the capitals are up 5.95% year to date, compared to 2.43% for regional areas. However, the pace of growth in regional markets has increased after lagging much of this year. In October, regional prices rose 0.32% to set a record high, while capital city prices rose 0.37% to a fresh record also.
• Regional Queensland (+0.61%) and regional WA (+0.45%) led regional gains in October, with prices in both markets reaching a new peak.

Outlook

The 2023 price upturn is firmly entrenched and prices hit fresh record highs in many markets in October.

Record levels of net overseas migration, a challenged rental market and limited housing stock are offsetting the impacts of substantial rate rises and the slowing economy with home prices continuing to rise.

According to Proptrack home prices fell at a fast pace in many markets in 2022 when interest rates were first rising, though those falls have now entirely reversed in many markets.

Earlier this year the turnaround in home prices was underpinned by the subdued listings environment that meant buyers were competing for fewer properties.

However, although the volume of new listings hitting the market has increased in recent months, housing demand has remained strong, bolstered by the strength in net overseas migration, as well as very tight rental markets.

At the same time, the sharp rise in construction costs, compounded by costly delays arising from labour and materials shortages, has slowed the completion of new homes and limited housing supply relative to demand is continuing to offset the substantial interest rate tightening already delivered and deterioration in affordability.

Further, continued low unemployment, resilient labour market conditions and slowly increasing wage growth remain a contributor to the sustained strength in market conditions according to Creagh .

Ten months of price rises that have gathered traction across markets alongside more positive market conditions are also likely to be drawing buyers off the sidelines.

In Sydney and Melbourne increasing confidence amongst sellers has seen the flow of new listings hitting the market surge, but strong home buying demand has absorbed the uplift in new stock for sale and seen prices continue to lift in October.

The choice for buyers remains limited in Brisbane, Adelaide, and Perth, sustaining buyer competition and solid selling conditions with prices continuing to lift and hitting fresh peaks in each of these markets in October.

Creagh concludes:

"Looking ahead, although interest rates may rise further, they remain close to if not at their peak and while the outlook for the economy is weaker, population growth is set to continue rebounding strongly.

Together with a shortage of new home builds and continued challenging conditions in the rental market, prices are expected to continue to rise despite affordability remaining stretched.

Further rate rises may be a headwind for the pace of growth but are unlikely to deter continued gains with strong population growth, tight rental markets and a housing shortfall proving a potent combination fuelling further price rises."

About Kate Forbes Kate Forbes is a National Director at Metropole assisting our high net worth clients safely grow, protect and pass on their wealth. She has 25 years of investment experience in financial markets on two continents, is qualified in multiple disciplines, and is also a Chartered Financial Analyst (CFA).